Madras High Court
M.Ravikumar vs The Registrar Of Co-Operative ... on 13 April, 2022
Author: S.Vaidyanathan
Bench: S.Vaidyanathan, Mohammed Shaffiq
W.A.No.2362 of 2019
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on : 15.02.2022
Pronounced on : 13.04.2022
CORAM
THE HONOURABLE MR.JUSTICE S.VAIDYANATHAN
AND
THE HONOURABLE MR.JUSTICE MOHAMMED SHAFFIQ
W.A.No.2362 of 2019
M.Ravikumar ...Appellant
Vs.
1.The Registrar of Co-operative Societies,
N.V.N.Maligai,
Kilpauk, Chennai-10.
2.The Joint Registrar of Co-operative Societies,
Namakkal Region, Namakkal District.
3.The Deputy Registrar/ Special Officer,
Tiruchengode Co-operative Urban Bank Ltd.,
Tiruchengode, Namakkal District. ... Respondents
Prayer:Writ appeal is filed under clause 15 of the Letter Patent praying to
set aside the order dated 14.02.2019 made in W.P. No.149 of 2019.
For Appellant : Mr.M.S.Palaniswamy
For Respondents : Mr.A.Selvendran
Special Govt. Pleader
Co-operative Societies
1/40
https://www.mhc.tn.gov.in/judis
W.A.No.2362 of 2019
JUDGMENT
S.VAIDYANATHAN, J.
and MOHAMMED SHAFFIQ, J.
This intra-court appeal is filed against the order in W.P.No.149 of 2019 wherein the prayer to issue a writ of mandamus to direct the Respondents to pay the retirement benefits viz., Provident Fund and Gratuity amounting to Rs.25,80,202/- with 12% interest was rejected by the learned Judge on the premise that the appellant ought to exhaust statutory remedy available under Section 153 of the Tamil Nadu Co-operative Societies Act (hereinafter referred to as "the Act").
2. Brief facts:
i) The appellant/ writ petitioner joined the 3rd Respondent/ Tiruchengode Co-operative Urban Bank (hereinafter referred to as "Bank") as Office Assistant in the year 1976. Thereafter, the appellant/ writ petitioner was promoted as Assistant on 01.08.1996 and then demoted to the post of Office Assistant. The appellant/ writ petitioner challenged the order of demotion by way of writ petition in W.P.No.39536 of 2016, we are 2/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 informed that the same is pending disposal.
ii) During the period of service of the appellant/ writ petitioner, the Deputy Registrar of Co-operative Societies, Tiruchengode Circle, ordered inspection under Section 82 of the Act with regard to non-recovery of certain loans, the enquiry officer concluded that the appellant/ writ petitioner was solely responsible for non-recovery of the same thereby causing loss to the Society. Based on the enquiry report of the Deputy Registrar, Tiruchengode circle, proceedings under Section 87(1) of the Act was initiated against him and a surcharge order was also passed against him with regard to a sum of Rs.28,29,943/-.
iii) The said surcharge proceedings was challenged before the Co-
operative Tribunal, Namakkal in C.M.A.(Cs).No.18 of 2012 and the same was dismissed. The order of the Tribunal was challenged before this Court in W.P.No.25412 of 2015 and the same stands dismissed on 30.01.2020, subsequent to the filing of the present writ petition in W.P.No.149 of 2019.
The learned Single Judge while affirming the order of the Tribunal found that the appellant/ writ petitioner by his inaction was solely responsible for the loans becoming sticky and irrecoverable resulting in loss 3/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 to the Society. Further, the learned Single Judge also held that the defence raised by the appellant/ writ petitioner on merits i.e., he cannot be held responsible because he was only a Cashier was also rejected on the premise that these contentions were being raised for the first time in the said writ petition. It is impermissible for the appellant/ writ petitioner to contend in this writ appeal that he cannot be held responsible for recovery of loans inasmuch as the above argument stands already rejected by the learned Single Judge in W.P.No.25412 of 2015.
The learned Single Judge while affirming the order of the Tribunal proceeded to hold as under :
"7. Before this Court ventures to consider the grounds raised in this writ petition as well as the during the course of argument it is to be pointed out that this writ petition though filed under Article 226 of the Constitution of India, has to be treated as a Civil Revision Petition filed under Article 227 of the Constitution of India, in the light of the authorative pronouncement of first bench in the case of E.S. Sundara Mahalingam Vs. Special Tribunal for Co-operative Cases & Ors. [W.A.No.4021 of 2019 dated 22.11.2019.4/40
https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 Therefore, though this writ petition has been filed under Article 226 of the Constitution of India is treated as petition under Article 227 of Constitution of India, resultantly, either party aggrieved by this order are not entitled for the remedy of an intra-court appeal.
..........
14. Thus, in the absence of any perversity in the order passed by the Tribunal, this Court does not find any grounds to interfere with the order. Further, it needs to be pointed out that this Court cannot examine the findings of the Tribunal order that of the 2nd respondent as if it is a 2nd Appellate Court.
15. In the light of the above reasoning, it is held that the petitioner has not made out any ground to interfere with the order passed by the Tribunal confirming the order passed by the 2nd respondent. "
iv) The appellant/ writ petitioner retired from service on 28.02.2017. In view of the Surcharge proceedings which has been confirmed by the Tribunal, the 3rd Respondent/ Bank paid only part payment to the appellant/ writ petitioner's Provident Fund of Rs.9,53,250/- (which represents the writ petitioner's contribution), other benefits like employer's contribution to Provident Fund and Gratuity Fund was retained by the Respondent -Society. 5/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 3.1 Case of the appellant:
It is the case of the appellant/ writ petitioner that the Respondent do not have any authority to withhold the retirement benefits in view of Sections 78 and 79 of the Act. It is submitted by the appellant/ writ petitioner that there has been a consistent view taken by this Hon'ble Court that retirement benefits cannot be retained by the employer as it is property/ right of the employee and do not represent largesse or a bounty.
3.2 Case of the Respondents:
To the contrary, it is submitted by the learned counsel for the Respondents that the surcharge proceedings against the appellant/ writ petitioner having been completed and which also stands confirmed by the Co-operative Tribunal in C.M.A.(CS)No.18 of 2012, Namakkal dated 27.10.2015 before retirement and the writ petition challenging the same having been dismissed by this Hon'ble Court in W.P.No.25412 of 2015, the recovery proceedings is valid.6/40
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4. Issue:
Two questions arise for consideration before this Court viz., a. Whether the order of the learned Single Judge insofar as it has only directed the appellant/ writ petitioner to avail the remedy available under Section 153 of the Act warrants interference.
b. Whether it is permissible for the Society to recover from the retirement benefits in the nature of Provident Fund/ Gratuity, monies that are due to the Society pursuant to Surcharge Proceedings completed prior to retirement of the employee.
5.1 First Question:
It appears to us that the direction to avail the statutory remedy under Section 153 of the Act may warrant interference for two reasons:
It may be relevant to refer to Sections 152 and 153 of the Tamil Nadu Co-operative Societies Act, which reads as under:
"152. Appeals._ (1) Any person aggrieved by-
(a) any decision or award passed or order made or proceedings taken under sub-section (1) of section 87, sub- section (2), sub-section (3) or sub-section (4) of section 90, 7/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 section 118, section 119, section 143, section 144 or section 167; or
(b) any award of an arbitrator or arbitrators under sub- section (2) or sub-section (3) of section 90;
(c) any award of an arbitrator under section 100, May appeal shall to the Tribunal;
Provided that nothing contained in clause (a) or clause
(b) of this sub-section shall apply to_
(i) any decision, order or award under sub-section (2), sub-section (3), or sub-section (4) of section 90 in respect of any matter relating to, or in connection with, the constitution of a board including any election thereto; or
(ii) any decision, order or award under sub-section (2), sub-section (3) or sub-section (4) of section 90 in respect of any matter relating to, or in connection, with, any matter not being a money claim;
(iii) any order of transfer, reference, withdrawal or re- transfer of a dispute under sub-section (2) or sub-section (3) of section 90.
.....
153. Revision ._ (1) The Registrar may of his own motion or on application, call for and examine the record of any officer subordinate to him or of the board or any officer of a registered society or of the competent authority constituted 8/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 under sub-section (3) of section 75 and the Government may, of their own motion or on application, call for and examine the record of the Registrar, in respect of any proceedings under this Act or the rules or the by-laws not being a proceedings in respect of which an appeal to the Tribunal is provided by sub- section (1) of section 152 to satisfy himself or themselves as to the regularity of such proceedings, or the correctness, legality or propriety of any decision passed or order made therein; and, if, in any case., it appears to the Registrar or the Government that any such decision or order should be modified, annulled, reversed or remitted for reconsideration, he or they may pass orders accordingly ........"
(emphasis supplied) The appellant/ writ petitioner has already exhausted his statutory remedy under Section 152 of the Act by challenging the Surcharge proceedings before the Tribunal. The revision under Section 153 may not apply to Surcharge proceedings in view of the fact that the scope of revision under Section 153 of the Act is limited to proceedings in respect of which an appeal to the Tribunal is not provided under Section 152(1) of the Act. Thus, it appears that the remedy under Sections 152 and 153 of the Act are mutually exclusive. Section 152 of the Act expressly provides that any 9/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 person aggrieved by any decision under sub-section (1) of Section 87 of the Act may appeal to the Tribunal. With regard to surcharge proceedings, the statutory remedy is only under Section 152 of the Act which has been exhausted by the appellant/ writ petitioner. An appeal under Section 152 of the Act was preferred by the appellant/ writ petitioner and having suffered an adverse order before the Tribunal, the same was challenged by way of a writ petition before this Court, which was also dismissed vide order dated 30.01.2020 in W.P.No.25412 of 2015.
Secondly, the present writ petition in W.P.No.149 of 2019 which is the subject matter of challenge in this writ appeal has been filed praying for a writ of mandamus to direct the Respondent/Society to pay the retirement benefits of Provident Fund and Gratuity Fund along with interest as the representation of the appellant/ writ petitioner dated 26.07.2018 has failed to evoke any response from the Respondent/ Society. The remedy under Section 153 is only against "proceedings" under the Act. In other words, there is no "proceedings" under the Act which is challenged in the present writ petition by the appellant/ writ petitioner for him to avail the remedy under Section 153 of the Act. The only proceedings that may be relevant is 10/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 one under Section 87 of the Act, against which an appeal was filed followed by a writ petition by which the order under Section 87 of the Act stands affirmed. In view of the above, the order of the learned Single Judge dismissing the writ petition on the ground of existence of alternate remedy under Section 153 of the Act is erroneous and unsustainable. 5.2. Second Question:
Whether it is permissible for the Society to recover from the retirement benefits in the nature of Provident Fund/ Gratuity, monies that have become due pursuant to Surcharge Proceedings completed prior to retirement of the employee?
We intend to answer the above question in III Parts viz., a. Scope of the embargo contained in Section 78 and 79 of the Act.
b. Relevance and bearing of the decision of the Full Bench of this Court in Andiyannan's case and the decision of the Hon'ble Supreme Court in Mahanidhi Coal Fields on the question.
c. Impact of the Construction placed by the earlier Division Benches on the “Doctrine of unjust enrichment”.11/40
https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 Before proceeding further it may be relevant to bear in mind that Surcharge Proceedings under Section 87 of the Act is intended to restore the shortfall or deficiency which the society suffers in the circumstances setout in Section 87 of the Act. In the present case, admittedly, the Surcharge Proceedings and the order of the tribunal affirming the same is made admittedly before the retirement of the appellant.
6. Scope of the embargo under Section 78 and 79 of the Act:
The sheet anchor of the argument of the appellant/ writ petitioner is the embargo against attachment provided under Section 78 and 79 of the Act with regard to Provident fund and Gratuity fund respectively. The relevant provisions are extracted below for reference:
"78. Provident Fund -
(1) A registered society not being an establishment to which the Employee's Provident Funds and Miscellaneous Provisions Act, 1952 (Central Act XIX of 1952) applies, may establish a Provident Fund for the benefit of its employees to which shall be credited all contributions made by the employees and the society in accordance with the by-laws.
(2) A Provident Fund established by a registered society 12/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 under sub-section (1) shall be invested in the financing bank, but shall not -
(a) be used in the business of the society;
(b) form part of the assets of the society;
(c) be liable to attachment or be subject to any other process of any Court or other authority.
79. Gratuity Fund -
(1) A registered Society not being an establishment to which the Payment of Gratuity Act, 1972 (Central Act 39 of 1972) applies, may provide in its by-laws for payment of gratuity to the employees at such rates and on such conditions as may be specified in the by-laws and such society may establish a Gratuity Fund or make other arrangements for the purpose.
(2) A Gratuity Fund, if any, established by a registered society under sub-section(1) shall be invested in the financing bank, but shall not -
(a) be used in the business of the society;
(b) form part of the assets of the society;
(c) be liable to attachment or be subject to any other process of any Court or other authority."13/40
https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 A reading of the above provisions would show that with regard to Provident Fund, a registered society not being an establishment, to which the Employee's Provident Funds and Miscellaneous Provisions Act, 1952 (Central Act XIX of 1952) applies, may establish a Provident Fund for the benefit of its employees to which shall be credited all contributions made by the employees and the society in accordance with the bye-laws. Importantly, the provident fund established by a registered society under sub-section(1) shall not be liable to attachment or be subject to any other process of any Court or other authority.
Similarly, with regard to Gratuity Fund, in respect of a registered society to which the payment of Payment of Gratuity Act, 1972 does not apply, the bye-laws may provide for payment of Gratuity to the employees and a Gratuity Fund established by the Registered Society would not be liable to attachment or be subject to any other process of any Court or other authority.
The embargo against the attachment to the Provident Fund and Gratuity Fund under Section 78 and 79 of the Act has been relied upon to 14/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 suggest that it is not open to the Society to recover the Provident fund and the Gratuity fund on retirement. A reading of the following judgments would suggest that Section 78 and 79 of the Co-operative Societies Act has been understood on more than one occasion by this Court, as an embargo against recovery by the employer:
i) A.Sengodan vs. Registrar of Co-operative Societies, reported in (2015) 6 MLJ 684 "6. A reading of the above extracted Section 79 makes it clear that the provisions of the Payment of Gratuity Act, are being incorporated therein, the gratuity earned by an employee for rendering service, cannot be with-held at the time of retirement.
.......
11. In my view, unless there is a statutory provision for with-holding the Provident Fund (relating to contributions of employer and employees) /Gratuity, or other retiral benefits, the same cannot be with-held. The employer cannot with-hold the above retiral benefits of the employees under any circumstances, in the absence of power conferred on them or provided under the relevant statute."
(emphasis supplied) 15/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019
ii) The Joint Registrar and others vs. K.Ambarayan in W.P.No.663 and 668 of 2015:
“8. The employee must be in a position to enjoy the benefits consequent to his retirement. The payment of Gratuity is not a matter of charity. It is the entitlement of the employee to receive the gratuity. There should be a valid reason to detain the payment of statutory benefits. We are therefore of the view that the appellants were not justified in keeping the benefits under the pretext that surcharge proceedings were pending. We therefore confirm the order passed by the learned single Judge.” (emphasis supplied)
iii) The Registrar of Co-operative Societies and others vs. A.Sengodan in W.P.No.1466 of 2015:
“6. We are in agreement with the reasoning of the Writ Court that in the absence of an enabling statutory provision, it would not be permissible for the employer to withhold the terminal benefits of a retired employee. This view is fortified by the decision of the Division Bench of this Court in Joint Registrar of Co-operative Societies; K. Ambarayan (Judgment dated 11.04.2018 in W.A. Nos. 663 and 668 of 2015), in which, 16/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 one of us (K.K. Sasidharan, J) is a party. The eligible amount of terminal benefits shall be disbursed to the Petitioner under written acknowledgment and a report of compliance shall be filed before the Registrar (Judicial) of this Court by 15.03.2019.” (emphasis supplied)
iv) The Joint Registrar of Co-operative Societies and others vs. M.Elumalai in W.A.No.3133 of 2019:
“5. In the case on hand, retirement benefits have been denied, on the ground that Section 81 proceedings have been initiated against the Respondent. Enquiry ordered in Section 81 of the Tamil Nadu Co-operative Societies Act, 1983, has not fructified into any proceedings, under Section 87 of the Act, viz., surcharge proceedings. Even in the case of initiation of surcharge proceedings, a Hon'ble Full Bench of this Court in S.Andiyannan's case, has held that departmental proceedings cannot be continued, after retirement of any employee. When disciplinary proceedings cannot be continued after retirement, no punishment, much less recovery or withholding of retirement benefits, can be ordered.” (emphasis supplied) 17/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019
v) Co-operative whole sale stores vs. R.Dhayalan and another in W.A.No.1395 of 2021:
"9. As the employee, the first Respondent is entitled for the retiral benefits after his retirement and even the Gratuity of an employee cannot be treated as a charge and it is for the service rendered by him. Therefore, the statutes are conscious of the fact that the Provident Fund and the Gratuity Fund cannot be attached or be subject to any other process of any court or other authority, which is made clear under Sections 78 and 79 of the Tamil Nadu Co~operative Societies Act. Therefore, we see no reason to interfere with the order of the learned Single Judge.
10. At this stage, it is pertinent to state that Section 87 of the Tamil Nadu Co~operative Societies Act, which deals with the surcharge proceedings, itself provides for recovery of the quantified amount from the employee by invoking the Tamil Nadu Revenue Recovery Act, 1864 treating the same as an arrear of land revenue. Therefore, there is no merit in the argument of the appellant stating that if the retirement benefits are disbursed to the Respondent, it would be difficult for them to recover the amount.” (emphasis supplied) 18/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 A reading of the above judgments would show that sub-section (3) to Sections 78 and 79 of the Act has been treated as imposing a limitation/ restriction/ embargo against the attachment of the Provident Fund / Gratuity Fund due to the employee, in the absence of an express provision which enables the Society to proceed against the employee.
Reliance on sub-section(3) to Section 78 and 79 of the Act to suggest an absolute embargo against attachment of Provident Fund or Gratuity by the Society/ employer due to the employee, is in our view misplaced. This is in view of the fact that the embargo against attachment is not intended to operate against the Provident Fund/ Gratuity Fund “due to an employee”, instead it appears that the embargo was intended to operate against any attachment by a third party to the Provident Fund, established by the Registered Society.
This would be clear from a reading of sub-section (2) to Section 78 and 79 of the Act, which are para materia and reads thus:
"78. Provident Fund -
(1)....
(2) A Provident Fund established by a registered society under sub-section (1) shall be invested in the financing bank, 19/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 but shall not -
(a) be used in the business of the society;
(b) form part of the assets of the society;
(c) be liable to attachment or be subject to any other process of any Court or other authority.
79. Gratuity Fund -
(1)...
(2) A Gratuity Fund, if any, established by a registered society under sub-section(1) shall be invested in the financing bank, but shall not -
(a) be used in the business of the society;
(b) form part of the assets of the society;
(c) be liable to attachment or be subject to any other process of any Court or other authority."
A reading of the above sub-section (2) to Section 78 and 79 of the Act would show that the subject matter of both the sub-sections is not the amount of Provident Fund or Gratuity Fund due to the employee but the subject matter is the Provident Fund established by the Registered Society. The logic apparently appears to be that the Society retains the Provident Fund and Gratuity Fund in its capacity as custodian/trustee, for it is the 20/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 property of the employee. The Legislature was anxious to ensure that the same is not subject to any attachment pursuant to any recovery proceedings against the Society, for the same would adversely affect the rights of the employees who have contributed to the said funds. However, it does not appear to be a bar/embargo against recovery by an employer/Society, out of the Provident Fund / Gratuity Fund due to an employee.
I. Full Bench decision of this Court and Mahanadi Coal Fields:
Reliance was also sought to be placed on the decision of the Full Bench of this Court in the case of S.Andiyannan vs. The Joint Registrar, Co-operative Societies reported in (2015) 3 LW 513 . The reference which was made to the Larger Bench was set out in the order of reference as under:-
"1. Whether the disciplinary proceedings initiated against an employee of a co-operative society, governed by the Tamil Nadu Co-operative Societies Act, 1983, could be continued even after retirement of the said employee?21/40
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2. Whether Section 87 of the Tamil Nadu Co-operative Societies Act, 1983 could be considered as an enabling provision impliedly empowering the disciplinary authority to continue the disciplinary proceedings even after the retirement of an employee of a co-operative society, governed by the Tamil Nadu Co-operative Societies Act, 1983?"
The Court on reference answered the above two questions as under:
"30. Answer to the first question referred to this Bench:
Under the Tamil Nadu Co-operative Societies Act, 1983, once an employee retired from service, there could be no authority vested with the employer for continuing any disciplinary proceeding, in the absence of relevant service Rules permitting the employer to continue the disciplinary proceeding. In other words, if there is no service Rules or bye-law of the society empowering the employer to continue the departmental proceeding, the employer, would have no authority to continue the departmental proceeding after the retirement of the employee."
31. Answer to the second question referred to this Bench:
As contemplated under Section 87 of the Tamil Nadu Co-operative Societies Act, 1983, the term ‘surcharge’ is not penal in nature, hence if there is admission with regard to the 22/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 loss caused by the employee or the same is established by the co-operative institution, based on the proceeding already initiated for surcharge, the same could be recovered in the manner known to law. However, the provision relating to surcharge under Section 87 of the Act is not impliedly empowering the disciplinary authority to continue any disciplinary proceeding against an employee, who retired from service, in the absence of any Service Rules or Bye-law. Hence, Section 87 of the said Act cannot be construed as an enabling provision or impliedly empowering provision to the employer to continue any disciplinary proceeding after the retirement of any employee, in the absence of any Service Rules."
(emphasis supplied) It thus appears from a reading of the Full Bench judgment of this Court that the question that arose for consideration was not with regard to the scope of the embargo against attachment under Section 78 and 79 of the Act, rather, the question was whether Section 78 and 79 of the Act would enable initiation of disciplinary/ Surcharge proceedings post retirement of an employee. It has been further clarified by the Full Bench of this Court that Section 87 of the Act cannot be construed as a provision enabling the 23/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 employer to continue any disciplinary proceedings after the retirement of any employee, in the absence of any Service Rules.
The question that arises for consideration, here is with regard to the scope of the embargo contained in Section 78 and 79 of the Act. Thus, the question that arises in the instant case is different in scope to which was considered by the Full Bench. Importantly, before the Full Bench, the scope of the embargo contained in Section 78 and 79 of the Act was never argued.
Thus, the order of the Full Bench cannot be treated as a precedent as to the scope of the embargo contained in Section 78 and 79 of the Act. In this regard, it is trite law that a decision which passes sub silentio may not have any precedential value and that a decision is only an authority for what it actually decides and not a proposition that may seem to flow logically from it. In this regard, it may be useful to refer to the following judgments:
i) Municipal Corporation of Delhi vs. Gurnam Kaur reported in (1989) 1 SCC 101:
"11. ............So far as the order shows, no argument was addressed to the court on the question whether or not any direction could properly be made compelling the Municipal 24/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 Corporation to construct a stall at the pitching site of a pavement squatter. Professor P.J.Fitzgerald, editor of the Salmond on Jurisprudence, 12th Edn. explains the concept of sub silentio at p.153 in these words:
A decision passes sub silentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to its mind. The court may consciously decide in favour of one party because of point A, which it considers and pronounces upon. It may be shown, however, that logically the court should not have decided in favour of the particular party unless it also decided point B in his favour; but point B was not argued or considered by the court. In such circumstances, although point B was logically involved in the facts and although the case had a specific outcome, the decision is not an authority on point B. Point B is said to pass sub silentio."
ii) State of Haryana vs. Ranbir, reported in (2006) 5 SCC 167 :
"12 ......A decision, it is well settled, is an authority for what it decides and not what can logically be deduced therefrom. The distinction between a dicta and obiter is well- known. Obiter dicta is more or less presumably unnecessary to 25/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 the decision. It may be an expression of a viewpoint or sentiments which has no binding effect. See ADM, Jabalpur vs. Shivakant Shukla reported in (1976) 2 SCC 521. It is also well settled that the statements which are not part of the ratio decidendi constitute obiter dicta and are not authoritative. (See Divisional Controller, KSRTC vs. Mahadeva Shetty reported in (2003) 7 SCC 197)"
The above principle which was laid in Quinn vs. Leathem reported in (1901) AC 495 : (1903) AER 1, has been followed in several other cases including Bhavnagar University vs. Palitana Sugar Mill Pvt. Ltd. reported in (2003) 2 SCC 111 and before that in Mafatlal Industries Ltd. vs. Union of India reported in (1997) 5 SCC 536.
In the present case, there is no dispute that the disciplinary and surcharge proceedings were initiated and completed prior to the retirement of the appellant, the appeal which was filed against the surcharge proceedings dated 10.10.2011 was also dismissed on 27.10.2015 thereby confirming the order under Section 87, both of which are prior to the retirement of the appellant/ writ petitioner on 28.02.2017, thus, the above decisions may not have any applicability to the present case even on facts. 26/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 For the sake of completion, it may be relevant to note that the Hon'ble Supreme Court in the case of Mahanadi Coalfields reported in (2020) 18 SCC 71 examined the following questions viz.,
i) Whether is it permissible in law for the appellant (employer) to withhold the payment of gratuity of the respondent (employee), even after his superannuation from service, because of the pendency of the disciplinary proceedings against him?
ii) Whether the departmental enquiry had been instituted against an employee while he was in service and continued after he attained the age of superannuation, whether the punishment of dismissal can be imposed on being found guilty of misconduct in view of the provisions made in Rule 34.2 of the CDA Rules of 1978?
The Hon'ble Supreme Court held that continuation of disciplinary proceedings and withholding of Gratuity after superannuation in view of pendency of disciplinary proceedings would depend on the rules governing the service, after finding that Rule 34.2 and 34.3 of CDA Rules, 1978 contained a deeming provision which enabled continuation of proceedings 27/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 even after superannuation.
In the instant case, as stated above, the disciplinary proceedings and the order of the Tribunal confirming the Surcharge proceedings were completed prior to retirement and thus the above decision may not have a bearing to the facts of the present case. This is apart from the fact that the question that was examined by the Hon'ble Supreme Court and that which stood decided by the Full Bench of this Court referred to supra are entirely different in scope.
II. Impact of Construction placed by earlier Co-ordinate Benches of this Court on “unjust enrichment” and cases of misappropriation etc.,:
Yet another aspect which also compels us to think that Section 78 and 79 of the Act and the embargo contained therein may not apply to a proceeding which has attained finality, is in view of the fact that such construction may result in permitting unjust enrichment. The concept of "unjust enrichment" has been applied in various circumstances including Service Law, it may be relevant to note that unjust enrichment even in the absence of any illegal action/ misdeeds/ misconduct has been understood 28/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 and explained to be part of fundamental principles of justice, equity and good governance. "Unjust enrichment" is a part of common law, permitting the same would be contrary to public policy, thus, any construction resulting in "unjust enrichment" ought to be eschewed. In this regard, it may be relevant to refer to the following judgments:
i) Indian Council for Enviro-Legal Action v. Union of India reported in (2011) 8 SCC 161:
"152. “Unjust enrichment” has been defined by the court as the unjust retention of a benefit to the loss of another, or the retention of money or property of another against the fundamental principles of justice or equity and good conscience. A person is enriched if he has received a benefit, and he is unjustly enriched if retention of the benefit would be unjust. Unjust enrichment of a person occurs when he has and retains money or benefits which in justice and equity belong to another.
153. Unjust enrichment is “the unjust retention of a benefit to the loss of another, or the retention of money or property of another against the fundamental principles of justice or equity and good conscience”. A defendant may be liable “even when the defendant retaining the benefit is not a 29/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 wrongdoer” and “even though he may have received [it] honestly in the first instance”. (Schock v. Nash [732 A 2d 217 (Delaware 1999)] , A 2d, 232-33.)
154. Unjust enrichment occurs when the defendant wrongfully secures a benefit or passively receives a benefit which would be unconscionable to retain. In the leading case of Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd. [1943 AC 32 : (1942) 2 All ER 122 (HL)] , Lord Wright stated the principle thus: (AC p. 61) “… [A]ny civilised system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is to prevent a man from retaining the money of or some benefit derived from another which it is against conscience that he should keep. Such remedies in English law are generically different from remedies in contract or in tort, and are now recognised to fall within a third category of the common law which has been called quasi- contract or restitution.”
155. Lord Denning also stated in Nelson v. Larholt [(1948) 1 KB 339 : (1947) 2 All ER 751] as under: (KB p. 343) 30/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 “… It is no longer appropriate, however, to draw a distinction between law and equity. Principles have now to be stated in the light of their combined effect. Nor is it necessary to canvass the niceties of the old forms of action. Remedies now depend on the substance of the right, not on whether they can be fitted into a particular framework. The right here is not peculiar to equity or contract or tort, but falls naturally within the important category of cases where the court orders restitution, if the justice of the case so requires.” (emphasis supplied) The above principle has been accepted in India. This Court in several cases has applied the doctrine of unjust enrichment. Restitution is a sequitor to "unjust enrichment" and the Hon'ble Supreme Court has explained the same as under:
"157. American Jurisprudence 2d, Vol. 66, Am. Jur. 2d defined restitution as follows:
“The word ‘restitution’ was used in the earlier common law to denote the return or restoration of a specific thing or condition. In modern legal usage, its meaning has frequently been extended to include not only the restoration or giving back of something to its rightful owner, but also compensation, 31/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 reimbursement, indemnification, or reparation for benefits derived from, or for loss or injury caused to another. As a general principle, the obligation to do justice rests upon all persons, natural and artificial; if one obtains the money or property of others without authority, the law, independently of express contract, will compel restitution or compensation.
.........
161. The terms “unjust enrichment” and “restitution” are like the two shades of green—one leaning towards yellow and the other towards blue. With restitution, so long as the deprivation of the other has not been fully compensated for, injustice to that extent remains. Which label is appropriate under which circumstances would depend on the facts of the particular case before the court. The courts have wide powers to grant restitution, and more so where it relates to misuse or non-compliance with court orders.
ii) C. Jacob v. Director of Geology and Mining reported in (2008) 10 SCC 115 :
"13. Where an employee unauthorisedly absents himself and suddenly appears after 20 years and demands that he should be taken back and approaches the court, the department naturally will not or may not have any record relating to the employee at that distance of time. In such cases, 32/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 when the employer fails to produce the records of the enquiry and the order of dismissal/removal, court cannot draw an adverse inference against the employer for not producing records, nor direct reinstatement with back wages for 20 years, ignoring the cessation of service or the lucrative alternative employment of the employee. Misplaced sympathy in such matters will encourage indiscipline, lead to unjust enrichment of the employee at fault and result in drain of public exchequer. Many a time there is also no application of mind as to the extent of financial burden, as a result of a routine order for back wages."
(emphasis supplied) The principle of "unjust enrichment" has been held to apply even to instances where the benefit is received not as a result of any wrong doing. However, the construction placed on the embargo contained in Section 78 and 79 of the Act by the earlier Benches of this Court may result in the same operating even to cases of misappropriation thereby resulting in the employee unjustly enriching themselves even in cases involving misappropriation.
It may be relevant to note that the Hon'ble Supreme Court while dealing with cases relating to misappropriation has taken a consistent view 33/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 that there is no place for generosity or misplaced sympathy and thus permitting retention of the benefit consequent to an act of misappropriation would become a means and source of "unjust enrichment" by the employee at the cost of the Society and thus ought to be avoided. Relevant portions of the judgments of Hon'ble Supreme Court are extracted below:
i) U.P. SRTC vs. Vinod Kumar, reported in (2008) 1 SCC 115 :
"10......This Court in a number of judgments has held that the punishment of removal/dismissal is the appropriate punishment for an employee found guilty of misappropriation of funds; and the courts should be reluctant to reduce the punishment on misplaced sympathy for a workman. That, there is nothing wrong in the employer losing confidence or faith in such an employee and awarding punishment of dismissal. That, in such cases, there is no place for generosity or misplaced sympathy on the part of the judicial forums and interfering with the quantum of punishment. Without burdening the judgment with all the judgments of this Court on this point, we may only refer to a recent judgment in Divisional Controller, N.E.K.R.T.C. v. H. Amaresh [(2006) 6 SCC 187 : 2006 SCC (L&S) 1290] wherein this Court, after taking into account the earlier decisions, held in para 18 as under : (SCC p. 193) 34/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 “18. In the instant case, the misappropriation of the funds by the delinquent employee was only Rs 360.95. This Court has considered the punishment that may be awarded to the delinquent employees who misappropriated the funds of the Corporation and the factors to be considered. This Court in a catena of judgments held that the loss of confidence is the primary factor and not the amount of money misappropriated and that the sympathy or generosity cannot be a factor which is impermissible in law. When an employee is found guilty of pilferage or of misappropriating the Corporation's funds, there is nothing wrong in the Corporation losing confidence or faith in such an employee and awarding punishment of dismissal. In such cases, there is no place for generosity or misplaced sympathy on the part of the judicial forums and interfering therefore with the quantum of punishment. The judgment in Karnataka SRTC v. B.S. Hullikatti [(2001) 2 SCC 574 : 2001 SCC (L&S) 469] was also relied on in this judgment among others. Examination of the passengers of the vehicle from whom the said sum was collected was also not essential. In our view, possession of the said excess sum of money on the part of the respondent, a fact proved, is itself a misconduct and hence the Labour Court and the learned Judges of the High Court misdirected themselves in insisting on the evidence of the passengers which is wholly not essential. This apart, the 35/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 respondent did not have any explanation for having carried the said excess amount. This omission was sufficient to hold him guilty. This act was so grossly negligent that the respondent was not fit to be retained as a conductor because such action or inaction of his was bound to result in financial loss to the appellant irrespective of the quantum.” (emphasis supplied)
ii) Tara Chand Vyas v. Chairman & Disciplinary Authority reported in (1997) 4 SCC 565 :
"2. .....Corruption has taken deep roots among the sections of the society and the employees holding public office or responsibility equally became amenable to corrupt conduct in the discharge of their official duty for illegal gratification. The banking business and services are also vitally affected by catastrophic corruption. Disciplinary measures should, therefore, aim to eradicate the corrupt proclivity of conduct on the part of the employees/officers in the public offices including those in banks. It would, therefore, be necessary to consider, from this perspective, the need for disciplinary action to eradicate corruption to properly channelise the use of the public funds, the live wire for effectuation of socio- economic justice in order to achieve the constitutional goals set down in the Preamble and to see that the corrupt conduct 36/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 of the officers does not degenerate the efficiency of service leading to denationalisation of the banking system....... Every employee/officer in the bank should strive to see that banking operations or services are rendered in the best interest of the system and the society so as to effectuate the object of nationalisation. Any conduct that damages, destroys, defeats or tends to defeat the said purposes resultantly defeats or tends to defeat the constitutional objectives which can be meted out with disciplinary action in accordance with rules lest rectitude in public service is lost and service becomes a means and source of unjust enrichment at the cost of the society."
Though the present case is one relating to recovery by way of surcharge proceedings due to loss suffered by the Society consequent to loans turning sticky and irrecoverable due to inaction of the appellant, we have referred to doctrine of unjust enrichment and also cases of misappropriation only to highlight that the construction placed on the scope of the embargo contained in Section 78 and 79 of the Act by earlier Co- ordinate Benches may produce results that is unintended rather which ought to be avoided and may thus require reconsideration. 37/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 We intend to reiterate that the embargo against attachment is not intended to operate against the Provident Fund/ Gratuity Fund “due to an employee”, instead it appears that the embargo was intended to operate against any attachment by a third party to the Provident Fund, established by the Registered Society.
The view expressed by us as to the scope of Section 78 and 79 of the Act is at variance with earlier Division Bench Judgments of this Court. In the circumstances, let the matter be placed before the Hon'ble Chief Justice for appropriate directions.
(S.V.N., J.) (M.S.Q., J.) 13.04.2022 Speaking order/Non-speaking order Index: Yes/No mka 38/40 https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 To:
1.The Registrar of Co-operative Societies, N.V.N.Maligai, Kilpauk, Chennai-10.
2.The Joint Registrar of Co-operative Societies, Namakkal Region, Namakkal District.
3.The Deputy Registrar/ Special Officer, Tiruchengode Co-operative Urban Bank Ltd., Tiruchengode, Namakkal District.39/40
https://www.mhc.tn.gov.in/judis W.A.No.2362 of 2019 S.VAIDYANATHAN, J.
and MOHAMMED SHAFFIQ, J.
mka W.A. No.2362 of 2019 13.04.2022 40/40 https://www.mhc.tn.gov.in/judis